Fort Dodge, Iowa is not exactly the kind of place you'd think of as a hotbed of healthcare innovation. But this small town is now a laboratory for a Medicare pilot project that economists say could show how to provide better care at a lower cost. Reporter Jenny Gold has the story.

JENNY GOLD, BYLINE: For years, Phil Bretthauer was one of Unity Point hospital system's most expensive patients. The 70-year-old was frequently in and out of the hospital in Fort Dodge.

GOLD: A year ago he had a heart attack and spent three weeks in the hospital plus another two in a rehab facility. All of it was paid for by Medicare. But that wasn't the end of it. When he finally got home to his apartment, he was sick, alone, and depressed.

BRETTHAUER: I was just so down. I didn't have anything to do. I'd get up in the morning and sit in this chair for eight hours.

GOLD: And worst of all, his primary care doctor, Lincoln Wallace, was almost sure Phil would be back in the hospital before long.

DR. LINCOLN WALLACE: It's a demoralizing position to be in, to watch a guy like Phil go out the door four years ago and to anticipate that he'll have some event that will likely either threaten his life or end up in the end of his life, and you have little or no way to stop it from coming.

GOLD: But this year, Unity Point decided to do something to stop the expensive cycle of illness and readmission. The hospital signed on to become an Accountable Care Organization, or an ACO. Here's how it works. A group of doctors and hospitals get together and form a network that takes care of a group of Medicare patients - in this case about 9,000 Iowans.

If the network can prove it's keeping those patients healthier and spending less money to do it, it get to keep some of the savings. Then it can use that money to do things Medicare doesn't usually cover - like reaching out more to patients at home. Dr. Wallace - Phil's physician - is in charge of the ACO.

WALLACE: Now, if I have someone with multi-organ system stuff, or I know that they're alone, I have some way to get care to them. And we can only do that because our system is able to figure out a way to make it work financially.

GOLD: Wallace started by identifying the patients like Phil who were sickest and costing the most. Then he formed a team around them, made up of doctors, nurses, social workers - anyone who might be able to help the patient stay healthy.

GOLD: Home health nurse Tammy Bennett is a crucial part of Phil's team. She visits him at his apartment every week or so to check in on him, look at his numbers, and go over all 17 of his medications.

BENNETT: What about your nitro have you had to take any for chest pains?

BRETTHAUER: No, no.

GOLD: And when Bennett can't be there, a telemonitor at Phil's apartment collects his vital signs.

BRETTHAUER: There you see the glucose level.

BENNETT: Well, it's 215 today is good.

BRETTHAUER: Two-fifteen and 290 yesterday, 145 - you see it bounces round.

GOLD: Phil is much more engaged in his health now.

BRETTHAUER: I feel protected. If something goes wrong, I call them, they get involved. It makes me feel safe.

GOLD: All that monitoring and data collection also helps Dr. Wallace track how his doctors are doing.

LINCOLN WALLACE: We know what each guys' per member per month costs are. I can even drill it down in terms of age, diagnoses, how many people are doing well with their cholesterol control, their diabetes control.

GOLD: And if a doctor isn't doing so well, Wallace lets them know. He says usually they adjust. But there are some things that can't be quantified. Earlier this year, Phil was hospitalized for major depression. When he got out, he was worried he'd be back to sitting in that chair, eight hours a day. Nurse Bennett knew she had to do something to keep him from slipping.

BRETTHAUER: Tammy asked me: What do you like to do? And I said, well, I've announced at a NASCAR track. I was involved in baseball.

GOLD: So she helped him get a gig announcing at the Little League games. And when baseball season ended, she helped him volunteer at the rehab facility where he'd been a patient just a year before. He visits a few times a week now, spending time with residents and his favorite: calling Bingo.

BRETTHAUER: We've got O62. O62. Oh, she's got Bingo, right here.

GOLD: Phil says being part of Unity Point's new efforts has been a lifesaver. And as for the hospital, their care really has gotten better. Patients, including Phil, are healthier and aren't coming to the hospital as often. The hospital system hasn't saved enough money to get a bonus from Medicare just yet but they're hopeful for next year.

For NPR News, I'm Jenny Gold.

MONTAGNE: And that story comes to us from Kaiser Health News, a nonprofit news service. Transcript provided by NPR, Copyright NPR.